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trade war
noun
a situation in which countries try to damage each other's trade, typically by the imposition of tariffs or quota restrictions.
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Countries around the world got an unwanted "gift" from Donald Trump. The president (even after being advised by allies not to) imposed Steel and Aluminum tariffs on countries around the world, with some exceptions. "We have to protect and build our steel and aluminum industries, while at the same time showing great flexibility and cooperation toward those that are really friends of ours," is what the US president said surrounded by happy looking steelworkers. The world held its breath as a "Trade War" that could shake up global economy became ever more likely.
Who was affected by the steel and aluminum tariffs?
As the news came out, allies of the United States were shocked. Some of them like members of the EU even threatened retaliation. Canada and Mexico were given an exemption because of the negotiating of their trade deal with the USA. The time was still there however, for other countries to reason their own exemptions. Eventually Argentina, Australia, Brazil, South Korea, and the EU were also excluded. These countries made up around 53 percentage of US Steel imports. China was one of the exporters of Steel and Aluminum to the United States. However, it made up only 2 percent of the imports that USA (the largest importer of Steel and Aluminum) imported, so no retaliation took place. Everybody took a breath of relief around the world. Maybe a global trade war isn't going to happen after all they thought. And oh boy were they wrong.
The next sign of aggression-
On the fateful day of March 22, Donald Trump signed 60 billion worth of tariffs on Chinese imports. The reason he gave was because of China's unfair trade practices which include the fact that a "technology transfer" is almost always required for a foreign company to produce in China. China responded with taxes on American imported meat, wine, fruit, nuts, ethanol and other products. This was bad for American farmers since they ship around 20 billion worth product to China. The US did not sit quietly, it released a list of 1300 Chinese imported products that would face 25 percent tariffs. China following the rule book of trade wars made another tit-for-tat move. China made its own list of US imports that will be targeted with 25 percent tariffs. "Trade wars are good and easy to win" is what Donald Trump had tweeted in the beginning of March. Well it seems as if a trade war is exactly what he wants with China and exactly what he is going to get. Both countries have "fired the dramatic opening shots" of a trade war.
How all this has affected USA-
The smiling Steel workers standing next to Trump when he announced the Tariffs can continue to smile. A recent study shows that 33.5 thousand jobs will be added for the Steel and Aluminum industry. However, the same study also shows that for every 1 job that the tariffs created 5 US jobs will be lost. Industries like the construction industry are hit particularly hard as the price of Steel and other metals would increase. The service industry will also suffer, the study predicts, due to increased priced in products like cars. If customers have to pay more for their vehicles (due to increased metal prices) they will have to cut spending in other places. The recreational and professional industry (like education and entertainment) are most vulnerable to reduction in spending. Tariffs on Chinese products have also increased prices for shoppers.
Are Trade Wars good?
Donald trump has in past events shown that all his statements might not be really true. So, are trade wars really "good and easy to win"? Actually, they are not, nobody wins in a trade war. All a trade war does is start a back and forth struggle between countries and damages the economies not only of the countries directly involved but, the global economy. History has proven this multiple times and each time one fact is forgotten. Trade is not a zero-sum game. If US imports Steel at a cheaper price from Mexico then it benefits multiple US companies, workers and consumers, not only Mexico. Trade wars only leave the world much poorer. Many people agree with it-
How likely is a trade war?
To the relief of many, a full out trade war is not very likely. As soon as Donald Trump put up the tariffs on Steel, he exempted a large proportion of countries that export Steel to the US. At the same time economically, China can't afford to go into a trade war. American imports are worth a lot more to China than Chinese imports are to America. Trump has a lot more leverage. Similarly politically, USA can't afford a trade war either. USA is a democracy, and all people affected by Trump's tariffs (such as farmers) are represented in congress (and midterm elections are coming up).
So, what will happen now?
The tit-for-tat may continue a little while more but, it will soon come to a stop. The aftermath will not include much more than "business as usual". This will serve as sort of a warning for China to improve (even slightly) on its trading practices. China has already put forward verbal commitments (which may or may not be fruitful). It has shown that it is not messing around by allowing foreign ownership in auto industry. Since the reason that Trump put the tariffs on China in the first place was "unfair trading practices". Any imports that may have been affected (such as pork), would already have been streamlined to countries other than China.